New China All-Cap ETF Gives Diverse Exposure

October 19, 2009


Claymore Securities, Inc. launched Monday its third China-focused exchange-traded fund, the Claymore/AlphaShares China All-Cap ETF (NYSEArca: YAO). YAO is designed to provide balanced exposure to investable small-, mid- and large-cap Chinese companies.

The ETF will hold 99 securities, with a capitalization breakdown tilted slightly toward mid- and small-cap stocks.

"China is the leading driver of global GDP growth today and will soon pass Japan to become the second largest economy in the world," AlphaShares' Chief Investment Officer Burton Malkiel said in a release. "However, most investors have less than 2 percent of their portfolio invested in China."

YAO will face strong competition from three existing ETFs that together have more than $10 billion in assets.

For starters, there is the $450 million PowerShares' Golden Dragon Halter USX China (NYSEArca: PGJ), which runs a slightly idiosyncratic portfolio of American depository receipts and tilts toward mid- and small-cap companies.

The $445 million SPDR S&P China ETF (NYSEArca: GXC) is another competitor, and has significant overlaps in its holdings with YAO. GXC tilts slightly toward large-caps compared with YAO, and actually has a broader portfolio, of 130 names.

YAO's biggest rival by assets is the $9.4 billion iShares FTSE/Xinhua China 25 ETF (NYSEArca: FXI), which holds a focused portfolio of 25 mega-cap stocks. FXI is somewhat akin to funds tracking the Dow Jones Industrial Average in the United States, and is often criticized for focusing solely on formerly state-owned megaliths. Half of its portfolio is dedicated to the financial sector, and many of those stocks are in commercial banks.

YAO will charge an expense ratio of 0.70 percent, slightly below FXI's 0.74 percent expense ratio, on par with PGJ's 0.70 percent and above GXC's 0.59 percent.

AlphaShares has two other ETF offerings with Claymore: the Claymore/AlphaShares China Real Estate ETF (NYSEArca: TAO), and the Claymore/AlphaShares China Small Cap Index ETF (NYSEArca: HAO).

You can read the prospectus for YAO here.


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